Debt crisis

04/22/2013

A man walks towards the Barajas international airport in Madrid on Monday. For the first time since the 1940s, the Spanish population has dropped as people leave the econmically challenged nation. (Paul White/Associate Press)

Here is a sad statistic -- Spain has experienced the first recorded population decline since the end of the Spanish civil war.

Reuters reported this morning that according to new figures from Spain's National Statistics Institute, the population fell by 206,000 to 47.1 million and that almost the entire drop is attributed to the flight of registered foreign residents.

Where everyone is going, is anyone's guess. However, a good bet would be Germany, the only European nation that seems to be able to consistently strengthen its economy.

Not since 1946 has Spain seen such a dramatic drop in those deciding to leave the European country.

Spain has suffered through years of economic recession and social upheaval after the global markets crashed in 2008.

Earlier this month the European Commission, not surprisingly, kept Spain on their list of 13 struggling countries to watch in the EU. In economic parlance, the commission warned Spain is "experiencing excessive macroeconomic imbalances. Although adjustment is taking place, the magnitude of the necessary correction requires continuous strong policy action."

Unemployment in Spain is a staggering 26.3 per cent, according to recent Eurostat data. That is only slightly better than Greece, which sits at 26.4 per cent.

For those under 25, the Spanish jobless rate is a whopping 55.7 per cent. The only nation in the European Union that is worse, is Greece at 58.4 per cent.

And, last week, at the International Monetary Fund's semi-annual meeting in Washington, D.C., Olivier Blanchard, the IMF's chief economist called low growth in the eurozone bad news for all European nations.

Spain is expected to experience a "substantial contraction" of its economy in 2013 before things start to improve, Blanchard said.

"The process of internal devaluation is slowly and painfully taking place, and most of these countries are slowly becoming more competitive. External demand, however, is just too weak to compensate for even weaker internal demand," Blanchard said on April 16.

In other words: Hold tight Spain. Somebody is going to start spending again, one day.

Tanya Talaga is the Star's global economics reporter. Follow her on Twitter @TanyaTalaga

04/19/2013

The Sistine Chapel at the Vatican, London's Tower Bridge and the Louvre in Paris are some of Europe's most fabled heritage sites. Travelling across the continent you'd think the Europeans had no difficulty preserving and promoting their historic monuments which are recognized the world over. For the most part that's true. But there are plenty of places that are falling down and need urgent help.

Europa Nostra, the heritage organization, has come up with a list of 14 most endangered monuments and sites -- ranging from churches to gaslights -- that need quick action.

In June, the list of 14 will be whittled down to a final seven at Europa Nostra's congress in Athens. A team of heritage specialists and technical experts will put together a rescue plan for the seven sites. Financial experts from the European Investment Bank Group will help come up with a strategy to raise money for the restorations. Not an easy task in these cash-strapped times.

Here is a selection of the 14 most endangered:

St. Paul and Peter Church, Armenia. The church dates back to the 5th century and is one of the first Christian structures. It is damaged because of regular flooding.

Photo courtesy of Ministry of Culture of the Republic of Armenia

Berlin's gas lights were installed 200 years ago and still work perfectly fine. A plan to replace them with modern electric version is opposed by residents and tourists who love the romance of the old-fashioned street lights.

Photo courtesy: Bertold Kujath – Gaslicht-Kultur e.V.

This 2nd century Roman amphitheatre was discovered in the 1960s in Durres, Albania. It is threatened by urban sprawl.

Photo courtesy of the Association for the Development of Cultural Tourism, Tirana, Albania

Conservationists from the Greek Cypriot and Turkish Cypriot communities have come together on the divided island to put together a joint plan to save a 1.5 kilometre historic buffer zone in Nicosia's centre which has been badly neglected.

Photo courtesy of Cyprus Architectural Heritage Organization

These 17th century fortifications designed to protect the city in the beautiful mountains of Briancon, France are decaying.

Hamida Ghafour is a foreign affairs reporter at the Star. She has lived and worked in the Middle East and Asia for more than 10 years and is the author of a book on Afghanistan. Follow her on Twitter @HamidaGhafour

04/17/2013

Spiegel Online is reporting German states, fed up with tax evaders sticking all their money into Swiss bank accounts, pooled their resources and bought a CD containing bank deposit details.The Rhineland-Palatinate state and four others bought the info for about $5.2 million, according to reports.

Apparently, the CD had information on 10,000 bank customers and German authorities used it to conduct "raids" on 200 alleged tax evaders, Spiegel Online said.

Rhineland-Palatinate officials have high hopes for their treasure trove. They are expecting to get their hands on about $650 million in back taxes.

Spiegel says customers with bank accounts in Credit Suisse, and the former Clariden Leu AG and Neue Aargauer Bank are affected.

Understandably, Swiss authorities are not amused.

One has to wonder who sold the information to the Germans, and, how the informer obtained it in the first place.

The International Consortium of Investigative Journalists blew the lid off of trillions of dollars hiding in tax havens, last month, when they published stories concerning the release of 2.5 million banking documents.

Nearly 260 gigabytes of emails, documents, corporate files and account ledgers were obtained by the ICIJ's director Gerard Ryle. The information came to him on a hard drive in a big, brown envelope. There has been no suggestion, whatsoever, that he paid for it.

Big Ben at dusk. British Prime Minister David Cameron's tough-minded austerity plan was somewhat panned by the IMF in Washington, D.C. on Tuesday. (Tanya Talaga/Toronto Star)

Global finance ministers, central bankers, academics and soothsayers have gathered this week in Washington, D.C., at the International Monetary Fund's semi-annual meeting.

The IMF unveiled its report card, of sorts, on the state of the global economy on Tuesday. Some countries were lauded for their economic efforts and others were given a bit of a slap.

Basically, as IMF chief economist Olivier Blanchard described it, the world's economy seems to be operating on three speeds -- emerging and developing nations are moving along, the United States seems to have backed away from the fiscal cliff nicely, and then, there is Europe.

Growth in developing markets should hit 5.3 per cent this year and 5.7 per cent in 2014. In the U.S., growth will be 1.9 per cent this year and 3 per cent next year. And in the eurozone area, growth is -0.3 per cent this year, rising to 1.1 per cent in 2014.

No surprises here -- Germany's economy continues to strengthen, Italy and Spain are expected to have "substantial contractions" this year and France is struggling with poor export performance, low confidence issues and labour reform dilemmas.

"Low growth in the euro core is bad news not only on its own, but is clearly bad news for euro periphery countries which depends very much on the core," Blanchard said during the World Economic Outlook 2013 release.

To reporters, Blanchard made special mention of the United Kingdom, which has followed a harsh austerity agenda - even though the IMF, and others, have warned them to stop because their tough medicine seems to be doing more harm than good.

In the face of "very weak private demand it may be time to consider an adjustment to the initial fiscal consolidation plans which were chosen a few years back."

Translation: It's time for Prime Minister David Cameron to forget this austerity agenda and get back to the drawing board.

Tanya Talaga is the Star's global economics reporter. Follow her on Twitter @tanyatalaga

The commission fired off an indepth communication to its member states on Tuesday, concerning the "prevention and correction of macroeconomic imbalances" about 13 countries. In other words, the commisson is saying "pull-up your socks" because we have analyzed your broad economic structure, behaviour and decision making and we've found some problems.

"In the decade leading up to the outbreak of the crisis, not enough attention was paid at the EU level to developments in the economies of individual member states," the report noted. "This was due in part to an insufficient recognition of the spillover effects of economic policies pursued in one member state on the economies of other member states ..."

On the list is Belgium, Bulgaria, Denmark, Spain, France, Italy, Hungary, Malta, the Netherlands, Finland, Slovenia, Sweden and the United Kingdom.

Spain and Slovenia are at the top of the naughty list.

Spain is "experiencing excessive macroeconomic imbalances. Although adjustment is taking place, the magnitude of the necessary correction requires continuous strong policy action." The report noted very high domestic and external debt levels pose great risks for growth and financial stability.

But the most dire warnining is directed at Slovenia, the small country south of Austria, that was one of the first post-communist states to join the EU. Many are warning Slovenia could be the next country to ask for a bailout from European lenders, however, the country maintains it is managing just fine.

The report said, Slovenia is "experiencing excessive microeconomic imbalances. Urgent policy action is needed to halt the rapid build-up of these imbalances and to manage their unwinding."

Periods of policy uncertainty and legal obstacles to reforms have prevented the country from correcting its problems, the commission said. Companies are "still unsustainably over-indebted" and there is a rise in "non-performing loans."

Be warned, 13. The commission is watching.

Tanya Talaga is the Star's global economics reporter. Follow her on Twitter @tanyatalaga

04/09/2013

A tram travels through a street in the Alfama neighbourhood of Lisbon on April 9. (REUTERS/Rafael Marchante)

Things
appear to be going from bad to worse in Portugal.

Last
week, the country’s top court ruled a series of austerity measures, outlined by
Prime Minister Pedro Passos Coelho, as unconstitutional, refusing to allow cuts to pensions and public sector
wages.

That
means Coelho must go back to the drawing board, looking for savings to comply
with the terms of Portugal’s 78 billion euro (about $102 billion Cdn) bailout
package from the troika of European lenders – the European Central Bank, the
International Monetary Fund and the European Commission.

Coelho
took to the airwaves on Sunday night to tell Portugese TV viewers that he has
no choice but to make deep cuts to health, education and social services. No doubt the news did not sit well with the Portuguese. Unemployment is nearly 20 per cent and previous austerity cuts have unleashed violent protests.

The
Financial Times is reporting that unless Portugal comes up with a plan, and
fast, they won’t get the next installment of 2 billion euros. European Union
finance ministers, fresh from their head-spinning Cyprus bailout shenanigans,
will now meet on Friday in Dublin to talk about what to do with Portugal.

But
all is not lost.

Jose
Manual Barroso, head of the European Commission, sent out a positive statement
of support, welcoming the decision of the Portuguese Constitutional Court,
adding the Portuguese government is committed to following austerity measures.

Those
would be measures Barroso also championed when he was prime minister of
Portugal from 2002 to 2004.

“Continued
and determined implementation of the programme offers the best way to restore
sustainable economic growth and to improve employment opportunities in
Portugal,” Barroso said.

“The
Commission will continue to work constructively with the Portuguese authorities
within the parameters agreed to alleviate the social consequences of the
crisis.”

Why do I
get the feeling nobody is breathing a sigh of relief?

Tanya
Talaga is the Star’s global economics reporter. Follow her on Twitter
@tanyatalaga

04/05/2013

The BBC's Great British Class survey which my colleague Jennifer Quinn wrote about resonates in the U.S. where the American dream may not be alive and well.

American social mobility is even lower than it is in the U.K., observes writer and
broadcaster Michael Goldfarb.

“It's been clear since the 1970s that the class system was
becoming more inflexible,” he writes on the BBC’s website. Goldfarb's father was a professor in Philadelphia and kids from such backgrounds found it
easier to coast and still succeed than bright kids from lower income families.

“He made a very nice living. Like seeks like, and we lived
in a neighbourhood of doctors, lawyers, executives, stockbrokers and successful
entrepreneurs. You had to work hard to fall out of that class.”

He continues: “Plenty of my school fellows did just OK in
high school, went to second-rank universities, where they majored in having a
good time, crammed for the LSAT (law school test) and squeezed into second-rank
law schools or business schools. They emerged on the other side with a
credential that allowed them to make a pretty good living without putting
themselves out too much. A young man from an inner-city school in Philadelphia
who took the same relaxed approach to study and career would never have made it
to law school or business school.”

Any more evidence needed that America has a class system? The Wall
Street Journal only yesterday mused on what a pen says about its owner: “In an age dominated by tech
gadgets such as cellphones, a pen can still make a potent statement.”

Hamida Ghafour is
a foreign affairs reporter at the Star. She has lived and worked in the Middle
East and Asia for more than 10 years and is the author of a book on
Afghanistan. Follow her on Twitter @HamidaGhafour

A growing Chinese middle class and an ease on travel restrictions
is behind the surge, the report notes. In 2000, only 10 million Chinese
travellers were criss-crossing the globe. By 2012, the number leapt to 83
million, the report said.

Behind them are the Germans who spent $83.8 billion U.S. on travel
abroad, the Americans at $83.7 billion, the British at $52.3 billion, the
Russians at $42.8 billion, the French at $38.1 billion and the Canadians at
$35.2 billion.

The Japanese come in eighth on the list of the world’s top
tourism spenders, dishing out $28.1 billion in 2012.

What’s clear is the emerging economies continue to lead growth in
tourism demand, UNWTO Secretary-General Taleb Rifai commented in a release.

“The impressive growth of tourism expenditure from China and Russia reflects the entry into the
tourism market of a growing middle class from these countries, which will
surely continue to change the map of world tourism,” he said.

Tanya Talaga is the Star's global economics reporter. Follow her on twitter @tanyatalaga

03/27/2013

Traders work the floor of the Cyprus Stock Exchange in Nicosia, in August 2000. Stock riches piled up until the divided island nation's boom went bust. (AP Photo/Christos Theodorides).

So the rich are different. What’s it to you?

Quite a lot, if you see some of the recent analysis of the growing gap between the 1 per cent and the rest of us whose chins are barely bobbing above the financial waves.

Chrystia Freeland’s new book Plutocrats: the Rise of the New Global Super-Rich and the Fall of Everyone Else throws a hand grenade into the (hopeful) belief that the economic system is just going through a bad patch.

Her message is both ground-breaking and chilling. Hyper-rich plutocrats are not only living on an ideological Pluto, but their power, influence and vast wealth are creating a global gated community that bodes ill for the majority here on Earth.

Freeland, now digital editor at Thomson Reuters, shared her thoughts from her office in New York:

Q: Are we seeing a whole new order of capitalism?

A: We are. Business has really gone global. Capital flows have gone global. It’s partly the result of globalization and technology and those trends are related. They have a broader reach. It means if you have a brilliant idea, like the 17-year-old kid who invented the algorithm, Yahoo will spot it and buy it for $30 million.

What that means is you have this winner-take-all phenomenon becoming much more powerful. It results in a thin slice at the top of the economy getting the lion’s share.

Q: And its first loyalty is to acquiring and expanding wealth.

A: It’s not necessarily about personal choice, it’s about a flawed way of thinking. By the nature of their business and their lives today they are inevitably pulled into a globalized world. They have much less connection and fewer ties to their national community. And their rewards are in the global world.

Q: Like Cyprus, where international money goes to hide from the national tax man.

A: Business has slipped the traces of national government. One way to think about it is the collective realization that you are no longer a captive of a nation state.

Q: You’ve focused on the richest 0.1 per cent. What did you discover about them?

A: One of my favourite anecdotes was from a private equity guy who said that Beijing and New York look a lot alike: same restaurants, same people. He said it with genuine sentiment. If you put an ordinary person on the street for five minutes they won’t be confused.

But for people in this space, those cities really are similar. It’s a disconnect that shapes their world view and their politics. Not just in subtle ways.

There’s also a disconnect of economic interests – Henry Ford said that you need to pay workers enough to buy your cars. That was the deal of post war America. The core idea was that the middle class needed to prosper because they were the consumers your business depended on. Now there are other markets.

Q: If the middle class – let alone the poor – don’t count to the power brokers, is the welfare state becoming extinct?

A: It’s both more necessary and harder to get political support for it. The middle class is hollowed out. Equality of opportunity is also eroded. Social mobility is getting worse. My favorite metaphor is that the distance between the rungs on the ladder is getting bigger.

The middle class needs more support. But the state’s ability to tax individual companies and the wealthy – and their view that it even matters – is less.

Q: And the effect on democracy?

A: These things are connected. One danger is that as you gain greater economic power, inevitably you use it to exert political influence. In the U.S. the most obvious sign is the “super PAC” (which can raise unlimited funds for political causes). But even more important is the tremendous money spent on lobbying.

It’s a human instinct to slant the rules of the game in your favour. As the gap (between very rich and the rest) gets greater their political influence also grows. When the middle class is hollowed, it’s harder to be engaged in the political process.

Q: Any lights at the end of this tunnel?

A: I think the process (of growing inequality) is inevitable. Economic forces pushing it are really powerful, and if anything, are getting stronger. The forces widening the gap will increase rather than weaken.

But it’s good to be optimistic. And it’s important to remember we have been there before. The strains imposed by the industrial revolution were in some ways worse. The poor were poorer and the system more closed – yet we got to a better place.

I don’t think it will happen in a day and it won’t be easy. I see it as our generation’s work of citizenship.

This interview was condensed.

Olivia Ward has covered conflicts, politics and human rights from the former Soviet Union to the Balkans, Northern Ireland, the Middle East and South Asia, winning both national and international awards. She has collaborated on two Emmy-winning films based on her work.

Greece’s society and economy is in tatters despite the billion-dollar bailouts from
Europe. Austerity has brought misery to its citizens.

In the midst of all that, Greece’s public prosecutor is
going after Vaxevanis for violating privacy data laws. He was acquitted last
year on those charges but faces a second trial in June.

When I interviewed Vaxevanis in Athens last November he expressed no regrets about publishing the list.

Actually, he did have one regret – how little coverage the
Lagarde List has received at home. He believes journalists are muzzled because all the major media outlets are owned by a narrow band
of business interests. His own case was symptomatic of the state of Greek democracy and journalism, he told me.

“Instead of chasing (the list) they (journalists) said it
was fake,” he said. “How did I get it the list? They questioned the way it was
released to the public when it was private. They didn’t question the substance
of the allegations.”

When I asked him if he would win his war against the bankers this was his thoughtful response:

"Either the economy will prevail over our politicians or politics will prevail over our economy. The tragedy is those who support the banks say this is how
markets operate and when those banks go bankrupt they are bailed out by the
state. People say we have to save Europe but that is not just the
City of London. It is French culture, German philosophy. It’s the people."

As for his award, he said in his acceptance speech in London last week that he had been attacked in his home, which was made to look like an attempted
burglary. But he was not afraid of going to jail for his beliefs.

“I want to state that if I am going to be convicted I will
not appeal but I will ask to be put in jail. I want to be a journalist in a
country that is not afraid of the truth,” he said in the speech.

Hamida Ghafour is a foreign affairs reporter at The Star. She has
lived and worked in the Middle East and Asia for more than 10 years and is the
author of a book on Afghanistan.
Follow her on Twitter @HamidaGhafour

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